Credit and Financial Analytics, 2021/22, Semester 1
V.Pazitka@leeds.ac.uk
Tutor information is taken from the Module Catalogue

It is essential that you complete the assigned reading for each week before watching lectures or attending workshops. This will help you to gain some basic understanding of the material that will be covered in each lecture / workshop and familiarise yourself with the technical vocabulary that I will use. I cannot emphasize enough how important this is in order to get the most of your lectures and workshops.

## Textbooks

I would recommend that you purchase a copy of 'Introductory Econometrics for Finance (4th ed.)' by Chris Brooks. We will use this textbook as well as its online learning resources extensively in this module. I have obtained a pemission from the CFA Institute to share selected section from their teaching materials with my students, so you do not need to buy the CFA Program Curriculum textbooks. The 'Introductory Econometrics: A Modern Approach' by Jeffrey Wooldridge is an optional additional textbook for this module.

Introductory Econometrics for Finance (4th edition),Chris Brooks , ISBN 9781108524872

CFA Program Curriculum 2022 Level I (Volume I)

CFA Institute

ISBN 9781950157426

CFA Institute

ISBN 9781950157488

Jeffrey M. Wooldridge, ISBN 9781337558860

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### Week 1 – Introduction to econometrics and dealing with data

Introductory Econometrics for Finance (Chris Brooks)

Chapter 1 – Introduction and Mathematical Foundations

Chapter 2 – Statistical Foundations and Dealing with Data

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Appendices – Math Refresher A – Basic Mathematical Tools

### Week 2 – Probability Distributions

Reading 4 – Common Probability Distributions

Section 1 – Getting Started

Section 2 – Data Management

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Appendices – Math Refresher B – Fundamentals of Probability

Appendices – Math Refresher C – Fundamentals of Mathematical Statistics

### Week 3 – Sampling and Hypothesis Testing

Reading 5 – Sampling and Estimation

### Week 4 – Simple Linear Regression

Introductory Econometrics for Finance (Chris Brooks)

Chapter 3 – A Brief Overview of the Classical Linear Regression Model

Reading 1 – Introduction to Linear Regression

Section 3 – Linear Regression – Estimation of an Optimal Hedge Ratio

Section 4 – Example 1: Hedging Revisited

Section 5 – Example 2: The CAPM

Jensen MC (1968) The performance of mutual funds in the period 1945-1964. The Journal of Finance 23(2): 389-416.

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 2 – The Simple Regression Model

### Week 5 – Multiple Linear Regression

Introductory Econometrics for Finance (Chris Brooks)

Chapter 4 – Further Development and Analysis of the Classical Linear Regression Model

Reading 2 (only pages 69-91) – Multiple Regression

DeBondt WFM and Thaler RH (1985) Does the stock market overreact? Journal of Finance 40: 793-805.

Clare AD and Thomas SH (1995) The overreaction hypothesis and the UK stock market. Journal of Business Finance and Accounting 22(7): 961-973.

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 3 (Sections 3.1 – 3.2)

Chapter 4

Chapter 7

### Week 6 – Model Validity and Diagnostics

Introductory Econometrics for Finance (Chris Brooks)

Chapter 5 – Classical Linear Regression Model Assumptions and Diagnostic Tests

Reading 2 (only pages 92-118) – Multiple Regression

Section 7 – Multiple Regression Using an APT-Style Model

Section 10 – Diagnostic Testing

Fama EF and French KR (1992) The cross-section of expected stock returns. Journal of Finance 47: 427-465.

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 3 – Sections 3.3 – 3.7.

### Week 7 – Time Series Analysis

Introductory Econometrics for Finance (Chris Brooks)

Chapter 6 – Univariate Time-Series Modelling and Forecasting (pages 246-272)

Reading 3 (only pages 167-186) – Time-Series Analysis

Brooks C and Persand G (2001) Seasonality in Southeast Asian Stock Markets: Some New Evidence on Day-of-the-week Effects. Applied Economics Letters 8(3): 155-58.

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 10 & Chapter 11

### Week 8 – Time Series Forecasting

Introductory Econometrics for Finance (Chris Brooks)

Chapter 6 – Univariate Time-Series Modelling and Forecasting (pages 272-288)

Reading 3 (only pages 186-194) – Time-Series Analysis

Chu KY (1978) Short-run forecasting of commodity prices: An application of autoregressive moving average models. IMF Staff Papers 25: 90-111.

Section 11 – Constructing ARMA Models

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 12

### Week 9 – Applied Econometric Analysis

Introductory Econometrics for Finance (Chris Brooks)

Introductory Econometrics: A Modern Approach (Jeffrey M. Wooldridge)

Chapter 19 - Carrying Out an Empirical Project

### Week 10 – Review of Key Concepts

STATA guide – Section 12 – Forecasting using ARMA models

Revise material from weeks 1-9 and prepare questions for an exam Q&A.

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## Econometric software guide

STATA guide to accompany ‘Introductory Econometrics for Finance (4th edition)’

https://www.cambridge.org/files/2215/5258/6000/stata_guide.pdf

Data files

Statistical software (STATA) is available for use in the computer labs or can be downloaded through the Software Centre app.

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## Journal articles

Brooks C and Persand G (2001) Seasonality in Southeast Asian Stock Markets: Some New Evidence on Day-of-the-week Effects. Applied Economics Letters 8(3): 155-58.

Chu KY (1978) Short-run forecasting of commodity prices: An application of autoregressive moving average models. IMF Staff Papers 25: 90-111.

Clare AD and Thomas SH (1995) The overreaction hypothesis and the UK stock market. Journal of Business Finance and Accounting 22(7): 961-973.

DeBondt WFM and Thaler RH (1985) Does the stock market overreact? Journal of Finance 40: 793-805.

Fama EF and French KR (1992) The cross-section of expected stock returns. Journal of Finance 47: 427-465.

Jensen MC (1968) The performance of mutual funds in the period 1945-1964. The Journal of Finance 23(2): 389-416.

Other readings will be provided as handouts and/or posted on the VLE as the course progresses.

This list was last updated on 06/10/2021